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China-EU trade spat over solar PV looms

China reserves the right to take further action if the European Union hits Chinese exporters with punitive solar panel duties, a senior Chinese trade official said on Monday, rejecting claims that Beijing had delayed talks.

Chong Quan, China's deputy international trade representative, also urged the EU to "cautiously use trade remedy measures", as both sides cannot afford a trade war.

The comments are Beijing's strongest on the EU case - the largest investigation the European Commission has ever launched - following China's top leadership transition.

"If the EU side keeps on its path, imposes restrictions on solar products and hurts the interests of Chinese enterprises, the Chinese government will never stand aside," Chong said in a statement emailed to Reuters.

"We will have no other option but to take all possible measures to protect the legitimate interests of domestic firms," he added.

The European Commission last September launched an investigation into whether Chinese solar panels were being dumped in EU markets and in November began a study into allegations of illegal subsidies.

Some EU officials had suggested China's leadership transition, which concluded this month with changes including a new commerce minister under President Xi Jinping, had stalled talks and increased the risk of a solar industry trade war.

But Chong said China never halted consultations, adding that Beijing hoped to resolve the issues through dialogue.

"The communication channels between the two sides always have been kept open and China has never suspended or delayed negotiation with the EU," Chong said in the statement.

Excess capacity

His comments come several days after China's biggest solar panel maker Suntech filed for insolvency and debt restructuring.

China's export-focused solar panel industry has been hit hard by excess manufacturing capacity and waning foreign demand as European nations cut back subsidies for green power.

European solar panel manufacturers, led by Germany's Solar World, accuse their Chinese counterparts of receiving state subsidies to flood the EU with panels sold below cost and putting Europeans out of business to corner the market.

Chinese solar panel exports to the EU reached 21 billion euros ($26 billion) in 2011, accounting for about 60 per cent of all Chinese exports of solar panels and components and some 7 per cent of all Chinese exports to the EU.

The EU has until June 6 to impose provisional duties on the imports if it believes they are justified. The deadline for imposing definitive duties, which would require a vote by member states, is Dec. 5.

But dumping duties could be retroactively applied after the Commission ordered EU customs officials to start registering imports in early March.

China says Europe illegally favors it domestic solar panel producers and Beijing is considering its own duties on EU exports of polysilicon, which is used to make solar panels.

Europe is the top market for solar products, accounting for 74 per cent of global installations in 2011, according to industry association EPIA.